![]() ![]() The researchers recommended policy makers and market participants closely watch local markets for booms in prices in order to better respond, “before misalignments become so severe that subsequent corrections produce economic upheaval.” This could cause a housing correction or possibly even a bust, according to the blog post. ![]() ![]() The cycle is interrupted when policymakers intervene, spurring investors to become cautious and causing the flow of money into housing to dry up. The consequences of housing market exuberance can include overpriced homes, investments based on distorted expectations of returns and reduced economic growth and employment. That can create a self-fulfilling prophecy, researchers said, in which price growth can become exponential. This fear of missing out, or FOMO, effect can drive up prices and heighten expectations of higher prices ahead. One possible reason, they suggested, is that buyers may believe prices will continue to climb and fear they will miss out on snagging a lower price on a home now and get stuck paying more later. And there are lots of reasons why home prices have risen steadily over the past decade – and shot up even more significantly in the past two years – including supply and demand imbalances in the market, rising labor and construction costs and how high or low the interest rates are for a mortgage, the researchers pointed out.īut they said prices may be rising to a point they call “exuberance,” in which prices become increasingly out of sync with the economic fundamentals underpinning the market. Just because home prices are rising wildly does not always mean housing is in a bubble. Many Americans are still scarred by the last housing crash in 2007, which was fueled by cheap credit and lax lending standards that resulted in millions of homeowners owing more on their homes than they were worth.īut this time, the economists said they are worried about a different scenario. Home prices rose 19.2% in January from last year Sales of existing homes dropped 7.2 percent in February as mortgage rates top 4 percent. A sale pending sign is posted in front of a home for sale on Main San Rafael, California. ![]()
0 Comments
Leave a Reply. |